Charting The Mid-East World

Our chart expert, Jordan Kotick pointed out “the rise in crude in 2008 was frenzied as it outperformed risky assets.” And since the bottom in 2009, crude prices have been on the rise, side by side with the equity market.

We’ll have to wait and see if this trend will continue. Kotick said, “a break of the range high, we are right near it, would suggest crude out-performance and a possible frenzied, Middle East catalyzed move.”

Kotick has been fairly bullish on crude prices for 2011 since Q4 of last year. However, he believes “the key is not that crude is going higher. It has been going higher for a year. The Middle East only supports a trend that is already going on. The key is whether crude will outperform the broader market.”

Now let’s turn a country in the Mideast that Kotick is focused on.

Q. You’re currently in Israel. You claim the situation in Israel is economically different than most other countries. Why?

A. While the much of the world, the US specifically, has seen real estate prices deflate, Israeli real estate has been aggressively inflating. It is up 15 to 20 percent per year over the last few years. Further, the stock market, the Tel Aviv 25 , is at all time new highs and still climbing. Israel just raised interest rates here for among other reasons, to slow things down a little. But the situation, in terms of the ascent of their real estate market, is both aggressive and impressive.

Q. Why are you relating the Korean and even some American stock markets to Israel? What’s the connection?

A. Simply because of their trajectory. Last year, the Tel Aviv 25 tested its all time high and is usually the case, a correction took hold. Technically speaking, this is what one should expect since important pivots rarely break without a fight. As you can see with the Kospi (like the Bovespa in Brazil or the Sensex in India) the market is testing its key high. So too are the Nasdaq and the Russell 2000.

Q. What are the implications?

A. The risk is a pull back, correction as the market(s) battle with these peaks. But ultimately, we expect them to break above these areas as did the Israeli stock market after its temporary pull back

Q. For an average investor, why does this matter?

A. Tech and small caps have been leading sectors since the market bottomed in March 2009. When they overcome their peaks, it was be a very positive sign.